Question

Gregory Company issues $5 million face amount bonds. The bond indenture is held by a large national bank. Which of the following explains why a bank is holding the indenture?

a) To ensure compliance with environmental regulations
b) To monitor the company's advertising strategies
c) To oversee the company's employee training programs
d) To protect the interests of bondholders and enforce the terms of the bond agreement

Answer 1

A bank holds the indenture of Gregory Company's bonds to protect the interests of bondholders and enforce the terms of the bond agreement.

Step-by-step explanation:

A bank is holding the indenture of Gregory Company's bonds to protect the interests of bondholders and enforce the terms of the bond agreement. By holding the indenture, the bank ensures that the company adheres to the terms of the bond agreement and makes timely interest payments to bondholders. If the company fails to meet its obligations, the bank can take appropriate actions, such as declaring the company in default and seeking remedies on behalf of the bondholders.